IIUC STUDIES

ISSN 1813-7733
Vol.- 9, December 2011
(p 187-214)

Accounting in Islamic Perspective: A Timely

Opportunity, a Timely Challenge
Dr. Alim Al Ayub Ahmed Arif Billah*
Md Alidul Islam**

Abstract: Accounting from Islamic Perspectives (AIP) is an

emerging field. Recent years have attracted scholars from
around the world who have contributed their thoughts
about how accounting can be seen from the Islamic lens.
However, the efforts so far are rather fragmented and
without a clear agenda for future research. This paper
presents a review of the literary achievements made in the
field and the areas of current focus. Although the field
carries a huge growth potential, the author argues that
there are several challenges and problems that the
proponents of AIP will face as the field develops further.
This paper outlines these problems and challenges and
makes suggestions to surmount the potential pitfalls. It is
argued herein that, in order to develop AIP as a formal
discipline and integrate it within real-life business
practices, the research efforts need to be more organized
through an international consortium of researchers. A brief
proposal for such consortium is included here. Finally,
recommendations are made for potential research
directions in which future research on AIP can be pursued.

Keywords: Accounting, Islamic Perspective, Business,

Organizations

I. Introduction
Islamic world has been lagging behind in contributing towards
scientific and technological advancement. There is reality in the truth
as statistics show that the Muslim world has so far produced only two
Nobel Laureates; there are only two universities in the Islamic world

*
ASA University
**
Reader, Innovation in Marketing and Accounting
IIUC Studies, Vol. 9

that are ranked among top 500 universities of the world; there are less
than 600 universities in the member Islamic states of Organization of
Islamic Countries; and 41 predominantly Muslim countries– that
constitute 20% population of the world–produce less than 5% of the
science (see: Segal, 1996; and Schopper, 2006). Segal (1996)
lamented that the Islamic world produces a disproportionately small
amount of scientific output, which is relatively very low in quality.
This is an alarming situation. However, there seems some light in the
end of the tunnel. Currently, there are many attempts underway to
improve the situation in various academic disciplines where Muslims
are coming upfront to contribute to various knowledge domains,
sometimes from specific Islamic perspective. Accounting from Islamic
Perspectives (AIP) is one such knowledge domain, which has recently
attracted many Muslim scholars to pay a serious attention.

Conventional accounting is a well-established field; although there is

no doubt that a major contribution to the extant body of knowledge on
accounting comes from the West rather than the East. Most theories
and frameworks in contemporary body of knowledge on accounting
come from the West without any reference to practices in the East.
Also, most Western perspectives on ‘accounting’ are predominantly
secular and capitalistic in nature. Such underlying convictions of
contemporary accounting theories have resulted in growing
incoherence within Eastern societies, which are more religious and
socialistic. On the other hand, there is much less contribution from the
East, particularly from the Muslim world. Moreover, there is an
obvious scarcity of literature on Islamic viewpoint on management
(Kazmi, 2003; Ismail and Sarif, 2007). At individual or small group
level, the work on accounting from Islamic viewpoint can be traced
back to authors such as Bani-Sadr (1980), Ezzati (1982), Fariduddin,
Sharfuddin (1987), Shirazi (1988/1408), Chapra (1992), Rahman
and AI-Buraey (1992), Faridi (1995), Beekun (1997), Beekun and
Badawi (1998), Al-Buraey (2003), Kazmi (2003); and more recently,
Ather (2005), Abuznaid (2006) and Beekun (2006), and Ata al-Sid
(2007), who have explored the field of accounting in a direct or
indirect relation to Islamic teachings. In addition to these works, some
rare PhD dissertations that address management from Islamic
perspectives include the works of Gahein (1986), Khalifa (2001) and
Mohiuddin (2004). At relative large scale, some notable endeavors to
explore management from Islamic lens include a Seminar on Islamic
Management held by IRTI (Islamic Research and Training Institute) in

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Malaysia in 1987 and International Conference on Management from

Islamic perspectives (ICMIP) in 2007.

A recent exploratory study of Sobhani and Ather (2007) has shown

that the development and practices of Islamic Management in
Bangladesh, a predominantly Muslim country, is very insignificant and
incommensurate to the population and that the concept of Islamic
Management in largely unknown. On the other hand, conventional
accounting practices are widely known and practiced. This example
shows that AIP is not even a commonly known discipline in the
Islamic societies. Though some organizations would like to claim that
their accounting practices follow the Islamic principles, such claims
are without an explicit recognition of AIP as an established set of
principles driving the everyday life of such organizations.

However, with spreading awareness about important role that different

cultural norms, language, spirituality, religiosity, social values, literary
expressions and symbolic modes play in the business environment,
researchers are diverting their focus on understanding the businesses in
an entirely different way. This movement is called postmodernism and
it accepts the possibility that several theories, which can conflict, can
still have a legitimate place in a social discourse (Goulding, 2003).
Under the influence of postmodernism and more importantly, a soaring
interest in Islamic banking and finance around the world has opened
the doors for Muslim scholars to think how other disciplines of
accounting can complement the developments in Islamic economic
systems. Toor (2007) observes that the spreading awareness about
Islam, escalating demand for management in Islamic way, growing
focus on Islamic banking systems, emerging concept of Shariah
compliance, evolving notion of dispute resolution in Islamic way, and
prolific wave of Islamic revival are some factors that have gradually
accentuated a need for formulation, testing, and validation of the
Islamic leadership construct, and steadily integrate it within Islamic
management practices. There have been debates and discussions in the
literary circles around the world, particularly in the Islamic nations, as
to how accounting can be viewed from the lens of Islamic teachings,
and how modern accounting practices can be transformed to
synchronize with Islamic philosophy of life.

This paper is a review of the extant body of knowledge on accounting

from Islamic perspectives. It draws attention to certain issues with the
hope that any further initiatives in the field effectively contribute to the

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development and growth of AIP as a formal discipline. The author

develops the case to argue that AIP scholars must be cognizant of the
history of the field, motives that are driving the development of the
field, contemporary issues that need priority attention in terms of
research, directions in which the future research can be directed, and
issues and challenges that are likely to emerge in developing AIP as a
formal discipline that is likely to result in the emergence of “Islamic
Accounting Theory” in the future. The field is still at a nascent stage
and is developing gradually. As research in this area grows further, the
existing body of knowledge will mature, new sub-disciplines will
emerge and the field will grow. However, for sustainable development
of AIP as a discipline, researchers need to take adequate steps to avoid
potential pitfalls and problems that can hinder the growth of the field
after it has gained certain momentum. Recommendations made in this
paper are with to initiate a dialogue to highlight more potential issues,
problems, challenges, areas of general focus, areas of priority, and
areas of caution. Discussion in this paper is very timely, given the field
is emerging rapidly and the future potential is very promising.

II. Why Accounting from Islamic Perspectives?

Describing the challenges of modern business enterprises, Professor
William George (2003) at Harvard observes that measures of business
development such as growth, cash flow, and return on investment are
fading away, and new criterion of success is “meeting the expectations
of security analysis”. To reach the earning targets, investments are cut
back resulting in the growth potential of company. To achieve the
targets, investments are cut back resulting in the growth potential of
company. To achieve the targets of profit maximization and to satisfy
shareholders, CEOs go to extreme measures. They have become
forgetful of human and social capitals, which earn long-term success for
the companies. They are anxious about profit maximization at the
expense of their employees and organizational values. Businesses of
today are undoubtedly going through a tumultuous era and markets are
more challenging than ever before. Such situation is no less than a
management and accounting crisis in the contemporary business world,
which is built on the model of capitalism. Apparent divorce of
spirituality from workplace is due to implicit or explicit assumption
those workplaces or other social institutions are secular (Hicks, 2002)
and secularism attempted to keep religion a personal matter. George
even goes to saying that capitalism has become the victim of it own
success. Modern organizations seem to suffer from so-called
“management crisis” due to every day corporate scandals, where leaders

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betray their own people and strive for worldly benefits. They are only
concerned about shareholders’ satisfaction and forget about their other
moral and ethical obligations to their organizations, followers, and
society at large. This leads to every materialistic approach to
management and accounting in the secularist and capitalistic systems,
which have successfully penetrated the many Islamic societies as well.
This is largely due to the curriculum of the schools and universities in
the Muslim countries that teaches various modern European arts and
sciences, which are far the most part alien to the Islamic perspective, has
to a large degree injected an element of secularism into the mind of
fairly sizeable segment of Islamic society (Nasr, 1961, cited in Ataal
Sid, 2007). However, Yom (2002) argues that secularism is increasingly
less relevant in the globalizing world, where religious identities have
strengthened and believers have grows in perpetuating and sharing their
narrative visions of the past, present, and future. Weary of the secular
models, a widening circle of scholars is now considering religion as a
viable alternative (Rae and Wong, 1996). In this respect, accounting
from Islamic perspectives is more relevant.

Abuznaid (2006) argues that though Islam does not provide a

comprehensive theory in accounting, nevertheless, it does provide set
of general guidelines that can be applied to achieve the fundamental
goals of management that are not fundamentally materialist (Rice,
1999). Primary goals of Islam are based on the concept of human well
being and good life, which stress brotherhood/ sisterhood and
socioeconomic justice, and require a balanced satisfaction of both the
material and spiritual needs of all humans (Chapra, 1992). In the
Islamic ethical system, specific guidelines are available for achieving
the moral filter and for conducting business. (Toor, 2007) also
observes “Islam provides the most comprehensive understanding of
leadership through its highly developed and modern ethical system that
seeks guidelines from Quran, Sunnah, and sayings of Prophet
Muhammad [PBUH]” (Toor, 2007, pp. 1). Others also note that Islam
provides comprehensive guidelines in all facets of life–be it religious,
moral, ethical, social–cultural, economic, political, or legal–to
underpin the foundations of a strong Islamic society, which is built
upon complete submission to Allah and teachings of Prophet
Muhammad (PBUH)” (Toor, 2007; Beik and Arsyianti, 2007).

In this respect, spirituality and religion in Islam are not two separate
entities; they are rather branches of the same tree. Scholars have
argued that many of the characteristics of spirituality in the workplace

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are basis themes of Islam. These characteristics may include the

building of community, concern for social justice within the
organization and its vision, and equality of voice (see Kriger and
Seng, 2005). “The values of service, surrendering self, truth, charity,
humility, forgiveness, compassion, thankfulness, love, courage, faith,
kindness, patience, and hope, in the workplace spirituality literature
(see Fry, 2003) are to be found not only in the Quran, but also in
popular Islamic wisdom literature, philosophical debates and the
mystical guidance of esoteric Islam, Sufism” (Kriger and Seng, 2005).

From Islamic perspectives, therefore, accounting is all about practicing

the positive norms and bringing self-transcendent values in everyday
life, while seeking the will of God and following his orders in form of
Prophet’s (PBUH) Sunnah. Goals of Islamic accounting and
management are not merely worldly and money-oriented; rather they
endeavor to seek a long-term intrinsic reward, the pleasure of God.
Islam holds all leasers and followers responsible for societal building
and for spreading the rule of Allah on earth. Both sides are equal in the
eyes of Allah and hence should perform their roles with greatest
integrity and dedication.

Under such a accounting system, where only positive organizational

behaviors are encouraged and performed in everyday life, there is high
chance that a positive organizational scholarship (see Cameron et al.,
2003) can be obtained where “organizations are typified by
appreciation, collaboration, virtuousness, vitality and meaningfulness.
Creating abundance and human well-bring are key indicators of
success…members of such organizations are characterized by
trustworthiness, resilience, wisdom, humility, and high levels of
positive energy…social relationships and interactions are characterized
by compassion, loyalty, honesty, respect, and forgiveness. Significant
attention is given to what makes life worth living.” In the above vision,
which Professor Kim Cameron has presented in his book: “Positive
Organizational Scholarship”, is fully in line with what the current
paper discusses as “Accounting from Islamic Perspectives”.

III. Literary Achievements

The author has argued in the previous pages that AIP is an emerging
field. However, very recent endeavors in the area have focused on
diverse subjects. Particularly, the International Conference on
Management from Islamic Perspectives (ICMIP) has been able to
attract rich perspectives from around the world resulting in a

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significant volume of works on various subjects within the domain of

AIP. Though a large body of knowledge exists on Islamic banking and
Islamic finance, literary attempts have been made in other directions
including, but not limited to, concept of management without
punishment (Dewi and Tanjung, 2007), organizational decision
making (Ismail and Ibrahim, 2007), corporate governance (Amer,
2007; Mat and Ismail, 2007; Dusuki, 2007), quality management
(Youssef and Al-Buraey, 2007), administrative theory (Sharfuddin,
1987), enterprise design (Chatha, 2007), management style of some
Prophets (Shirazi, 1988), management of non-profit organizations
(Kadi, 2007), and managerial and business ethics (Beekun, 1996).

The review from the literature (Toor, 2007 and Saleh, 2007) illustrates
that AIP has triggered discussions in many parts of the world resulting
in works in diverse areas where scholars have tried to view various
disciplines from Islamic viewpoint. Although literature on Islamic
perspective is just beginning to explore various dimensions of
accounting, there is an obvious promise in the attempts made so far.
Frameworks, constructs, theories, and proposals related to AIP are all
in a very nascent form with enthusiastic future research plans by their
proponents. However, before the research on AIP has gained full
momentum, the pioneers of the field need to take a pause and discuss
the issues that can have long-term repercussions on the field.

IV. Religious (Cultural) Based Accounting

Japan that has a strong commitment to its traditional culture has a strong
ability to formulate, to implement, its own accounting philosophy and
principles difference from that of capitalistic society. Shinto for example
has a potential drive to establish a Shinto based Accounting.

V. Developing AIP as A Formal Discipline

Scholars have emphasized on development of management in Islamic
perspective as a formal academic discipline (Ismail, 2007). However,
this aspiration needs in-depth analysis and pragmatic considerations.
There are many questions that the researchers in this area will have to
address while taking up this task. The following section elaborates on
the challenges that are likely to emerge while developing AIP as a
formal discipline.

VI. Defining AIP

‘Islamic accounting’ as an emerging discipline, which deals with the
financial reporting of organizations from the perspective of the

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knowledge acquired from the revealed and other Islamic sources of

knowledge, and results in applications compatible with the Islamic
beliefs and practices. Of course, the aims, objectives, operational
activities and results of ‘Islamic accounting’ are determined according
to Islamic Aaqida’ and Shari’ah.

Christopher Napier christopher.napier@rhul.ac.uk, Royal Holloway,

University of London, note that the emergence of Islamic banks and
other financial institutions since the 1970s has stimulated a modern
literature that has identified itself as addressing "Islamic accounting".
Much of this literature is prescriptive, though studies of actual
practice, and of attitudes to proposed alternatives, are beginning to
emerge. Historical research into Islamic accounting is still in a process
of development, with a range of studies based on both primary
archives and manuals of accounting providing growing insight into
accounting in state and private contexts in the Middle East. Other parts
of the Muslim world are also the focus of historical accounting
research. There is still much to discover, however, before historians
can determine the influence of Middle Eastern accounting ideas and
practices in other parts of the world. Moreover, the term "Islamic
accounting" may simply be a convenient label to group together quite
disparate accounting practices and ideas across time and space.

According to Hayashi ‘Islamic Accounting’ (1989), “is an integrated

discipline with social, political and economic domain ruled by Allah or
“meta rule”. Islamic accounting should regulate and establish a
harmonious integration among the parties of these diverse domain”.
Hayashi continues that the Islamic accounting which has implicit
economic, political and religious meaning (an integrated world view
system, author), has the possibility to show the key to a post
Newtonian Accounting (Western Secular based accounting, author)”.

Islamic accounting is generally defined as an alternative accounting

system, which aims to provide users with information enabling them to
operate businesses and organizations according to Shariah, or Islamic
law. ………With little doubt, the greatest challenges to Islamic
accounting and finance in the new world stem from a lack of
knowledge and understanding of Islam and the intricacies of its
financial laws. (October 5, 2006 http://www.accountingweb.com/cgi-
bin/item.cgi?id=102651,) Dr. Shahul Hameed bin Mohamed Ibrahim
says in http://islamic-finance.net/islamic-accounting/, both
conventional and Islamic accounting provides information and define

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how that information is measured, valued, recorded and

communicated. Conventional accounting provides information about
economic events and transactions, measuring resources in terms of
assets and liabilities, and communicating that information through
financial statements users, typically investors, rely on to make
decisions regarding their investments. Islamic accounting, however,
identifies socioeconomic events and transactions measured in both
financial and non-financial terms and the information is used to ensure
Islamic organizations of all types adhere to Shariah and achieve the
socio-economic objectives promoted by Islam. This is not to say, or
imply, Islamic accounting is not concerned with money, and rather it is
not concerned only with money.

The purpose of shariah (Islamic law) is to promote the welfare of the

people which lies on: Safeguarding of their faith; their life; their
intellect; their posterity and their Wealth. (Al- Gazali: 1058-1111)

Islamic accounting, in many ways, is more holistic. Shariah prohibits

interest-based income or usury and also gambling, so part of what
Islamic accounting does is help ensure companies do not harm others
while making money and achieve an equitable allocation and
distribution of wealth, not just among shareholders of a specific
corporation but also among society in general. Of course, as with
conventional accounting, this is not always achieved in practice, as an
examination of the wide variances in wealth among the populations of
Arab nations, particularly those with majority Muslim populations
shows. In addition, because a significant part of operating within
Shariah means delivering on Islam’s socio-economic objectives,
Islamic organizations have far wider interests and engage in more
diverse activities than their non-Islamic counterparts.

Researchers exploring various sub-disciplines of AIP do attempt to

define the key terms in sub-disciplines–such as Ownership, Debt
Contract and Accounting, Trusteeship of Mankind, Inequality -
Natural, Record Book – Audit, Meeting Account, Verification of
Information, Fulfill Contract, Full Measure and Weight in Just,
Dealing in Fraud who give less in measure, quality management,
corporate governance–it seems as if no deliberate attempt has been
made to formally define AIP.

Most researchers seem to have added the word “Islam” or “Islamic

perspective” with the conventional definitions of accounting, which itself

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seems to have been defined in several different ways and has no ‘agreed-
upon’ definition. Nevertheless, since AIP is just beginning to emerge, it
seems plausible to have formal and agreed-upon definition of AIP to
achieve coherence in ideas and to direct the efforts in one direction.

In view of Cooper et al., (2005, pp. 478), “a refined definition must

include a specification of the nature of the dimension (e.g., trait,
behavior, attribution, etc.), the observer/perspective of the persons(s)
providing the report (e.g., self, subordinate, peer, etc.), the level(s) of
analysis involved (e.g., individual, dyad, group, organization, etc.), the
response category measurement units to be employed (e.g., frequency,
magnitude, extent of agreement, etc.), and the dimension’s content
domain (including whether there are sub-dimensions involved).” In
order to establish a formal definition of AIP, researchers will need to
specify full set of dimensions, underlying concept, and sub-divisions of
AIP. For this purpose, use of qualitative procedures is recommended.
Such approaches include case studies of the organizations that claim to
be implementing Islamic ways of accounting and interviews of
practitioners, entrepreneurs, leaders, and managers, who appear to be
following more Islamic approach of accounting. Input of Muslim
religious scholars and accounting experts can also provide useful
insights to develop and sharpen the definition of AIP.

VII. Islamic Accounting Web – (http://www.iiu.edu.my/iaw/)

The Islamic Accounting Website is a project of the Department of
Accounting, Kulliyah of Economics and Management Sciences,
International Islamic University Malaysia, Kuala Lumpur. This project
is under the direction of Dr. Shahul Hameed bin Mohamed Ibrahim,
Assistant Professor and the current Head of the Department. The
philosophy of the University is to Islamize knowledge to solve the crisis
in Muslim thinking brought about by the secularization of knowledge
and furthermore contributing as a centre of educational excellence to
revive the dynamism of the Muslim Ummah in knowledge, learning and
the professions. The Department of Accounting is fully committed to
this vision and strives to Islamise Accounting.

VIII. Bases of Islamic Accounting: Al Quran

Islamic accounting can be defined as the “accounting process” which
provides appropriate information (not necessarily limited to financial
data) to stakeholders of an entity which will enable them to ensure that
the entity is continuously operating within the bounds of the Islamic
Shari’ah and delivering on its socioeconomic objectives. Islamic

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accounting is also a tool, which enables Muslims to evaluate their own

accountabilities to Allah (in respect of interhuman/ environmental
transactions).

A. Ownership
To Him belongs what is in the heavens and on earth, and all between
them, and all beneath the soil. (Surah Ta- Ha:6)

B. Debt Contract and Accounting

“O ye who believe! When ye deal with each other, in transactions
involving future obligations in a fixed period of time, reduce them to
writing let a scribe write down faithfully as between the parties; let not
the scribe refuse to write: as Allah has taught him, so let him write. Let
him who incurs the liability dictate, but let him fear his Lord Allah, and
not diminish aught of what he owes. If the party liable is mentally
deficient, or weak or unable himself to dictate, let his guardian dictate
faithfully. And get two witnesses, out of your own men, and if there are
not two men, then a man and two women, such as ye choose, for
witnesses, so that if one of them errs, the other can remind her. The
witnesses should not refuse when they are called on (for evidence).
Disdain not to reduce to writing (your contract) for a future period,
whether it be small or big: it is juster in the sight of Allah, more suitable
as evidence, and more convenient to prevent doubts among yourselves
but if it be a transaction which ye carry out on the spot among
yourselves there is no blame on you if ye reduce it not to writing. But
take witnesses whenever ye make a commercial contract; and let neither
scribe nor witness suffer harm. If ye do (such harm), it would be
wickedness in you. So fear Allah; for it is Allah that teaches you. And
Allah is well acquainted with all things.” (Surah Al-Baqarah:282)

C. Trusteeship of Mankind
Behold, thy Lord said to the angels: "I will create a vicegerent on
earth." They said: "Wilt Thou place therein one who will make
mischief therein and shed blood? Whilst we do celebrate Thy praise
and glorify Thy holy (name)?" He said: "I know what ye know not.”
(Surah Al- Baqarah:30)

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D. Inequality - Natural
And it is He Who hath made you (His) agents, inheritors of the earth:
He hath raised you in ranks, some above others: that He may try you in
the gifts He hath given you: for thy Lord is quick in punishment: yet
He is indeed Oft- Forgiving, Most Merciful. (Surah Al-An’am:165)

E. Record Book - Audit

Then he who is given his Record in his right hand, Soon will his
account be taken by an easy reckoning, And he will turn to his people,
rejoicing!, But he who is given his Record behind his back, Soon will
he cry for Perdition, And he will enter a Blazing Fire.
(Surah Al-Inshiqaq:7-12)
F. Meeting Account
Then he that will be given his Record in his right hand will say: "Ah
here! Read ye my Record!, "I did really understand that my Account
would (one Day) reach me!”. (Surah Al-Haqqah:19-20)

G. Don’t Mix Truth with Falsehood

And cover not Truth with falsehood, nor conceal the Truth when ye
know (what it is). (Surah Al-Baqarah:42)

But verily it is Truth of assured certainty. (Surah Al-Haqqah:51)

H. Verification of Information
O ye who believe! if a wicked person comes to you with any news,
ascertain the truth, lest ye harm people unwittingly, and afterwards
become full of repentance for what ye have done. (Surah Al-Hujurat:6)

I. Fulfil Contract
Come not nigh to the orphan's property except to improve it, until he
attains the age of full strength; and fulfil (every) engagement, for
(every) engagement, will be enquired into (on the Day of Reckoning).
(Surah Al-Isra:34)

J. Full Measure and Weight in Just

Give full measure when ye measure, and weigh with a balance that is
straight; that is the most fitting and the most advantageous in the final
determination. (Surah Al-Isra:35)

K. Dealing in Fraud Who Give Less in Measure

Woe to those that deal in fraud, Those who, when they have to receive
by measure, from men, exact full measure, But when they have to give
by measure or weight to men, give less than due. Do they not think

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that they will be called to account ? On a Mighty Day, A Day when

(all) mankind will stand before the Lord of the Worlds ? Nay! Surely
the Record of the Wicked is (preserved) in Sijjin. And what will
explain to thee what Sijjin is? (There is) a Register (fully) inscribed.
(Surah Al-Mutaffifin:1-9)

L. Which is Left by ALLAH is Better

To the Madyan people (We sent) Shu'aib, one of their own brethren: he
said: "O my people! Worship Allah: ye have no other god but Him.
And give not short measure or weight: I see you in prosperity, but I
fear for you the Penalty of a Day that will compass (you) all round.
"And O my people! give just measure and weight, nor withhold from
the people the things that are their due: commit not evil in the land
with intent to do mischief. "That which is left you by Allah is best for
you, if ye (but) believed! but I am not set over you to keep watch!”
(Surah Hud:84-86)

IX. Distinguishing AIP from Conventional Accounting

After researchers have defined and sharpened the definition of AIP,
they will need to take a clear and elaborate stance as to how AIP
differs from conventional accounting or emerging forms of accounting,
which drive their inspiration from spirituality and servant leadership. If
they are not able to distinguish AIP from existing and other emerging
forms of accounting, this would imply that it is either equivalent to the
conventional accounting with add-on of spirituality or a simply
redundant concept. Researchers will also need to identify and focus on
the points of divergence and accentuate these in their conceptualization
and measurement of AIP. Though some scholars have already given
some attention to the issue arguing that conventional accounting and
AIP are distinct, there are many who note both similarities. For
example, Loqman and Bulbul (2007) note that the 14 principles of
conventional management given by Henri Fayol; are alike the
principles of Islamic Management.

Some assertions, however, show that Islamic perspective offers

distinct way of accounting. Loqman and Bulbul (2007) call these
points of distinctions as additional principles of management. These
include: khilafa (vicegerency), honesty, truthfulness, promise keeping,
moderation, sincerity, timeliness, efficiency, patriotism, exemption,
accountability in this world as well as in the life hereafter and more
over Tawakkul (depending upon Allah SWT). These principles are not
present in the conventional accounting approaches and therefore make

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AIP a unique perspective. Toor (2007) joins this stance and argues
that Islam provides “extra dimensions” that are likely to enhance the
positive nature of Islamic leadership. The most important “extra
dimensions” in this regard include: surrendering to Allah SWT,
trusteeship of Allah SWT, accountability to Allah SWT, obedience of
Allah SWT and the Prophet, following the Shariah, virtuosity, mercy,
forgiveness, compassion, social justice and consideration, service of
mankind, righteousness, humility, positive firmness, inner struggle
against the self, honesty, truthfulness, and positive organizational
scholarship (hope, optimism, self-efficacy, and resiliency) from
Islamic viewpoint. It also argues that Islamic accounting seems to
differ on the worldview of accounting, its concepts and issues. They
further note that Islamization of accounting is basically the need for a
tauhidik approach based on social justice, fairness in managing people,
and to seek the will of Allah SWT.

Despite these claims, there is a further need to distinguish how AIP

differs from existing forms of accounting. This distinction will not only
have an favorable impact on furthering the research on AIP, but it will
also help in making a better understanding of the work that has already
been done in the field. Distinguishing AIP from existing forms of
accounting will also help to send the message across that AIP offers
something unique and extra, and that the organizations can develop a
sustainable competitive advantage from this something unique and
extra. On a practical level, any misunderstanding or confusion of AIP
with conventional accounting might hinder the development of AIP as a
discipline. If researchers argue that AIP is a new discipline and is
substantially different from the conventional accounting, clear lines of
boundaries need to be drawn as to how both fields differ, although they
may complement each other in many ways. These boundaries need to be
drawn beyond definitional differences, by including conceptual
distinctions, and functional divergence between conventional accounting
and AIP. Such discussions can also address behavioral differences
between a conventional accountant or and an AIP-accountant.

X. Measuring AIP
This is probably the biggest challenge that will confront the proponents
of AIP. Current body of knowledge on AIP bases itself on integration of
spirituality and religiosity within accounting practices. However, in the
mainstream, there remains a debate on whether spirituality and
religiosity represent one construct or they are two different constructs
that cannot be combined together. There have been claims that

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religiosity is a very complex construct and is extremely hard to measure

(Hashim, 2007, Muhamad, 2007), though some researcher have
attempted to develop and validate such measures. Researchers have
similar views about spirituality that it is complex and hard to measure
(see: Fry, 2003; Fry et al., 2005; Dent Barrett, 2003; Ashmos &
Duchon, 2000; MacDonald et al., 199; Elkins et al., 1988).

However, all such measures of religiosity and spirituality have been

established outside the Muslim world. Therefore, researchers will need
to establish measures of religiosity and spirituality from Islamic
perspective. As researchers of AIP currently argue that it is an
integration of spirituality and religiosity, they will need to establish
valid measures through which AIP can be assessed. For this purpose, it
is important that two separate standardized quantitative measures are
developed to assess AIP in the financial reporting. For this purpose,
extensive labor and collaborative projects will have to be designed to
develop and validate these measures across different cultures.
Researchers will need to begin the work using qualitative approaches
to eventually arrive at quantitative measures.

XI. Regulatory Issues

The regulatory environment, Islamic individuals and organizations are
most concerned with, considering the current political climate, are
those relating to anti-terrorism and antimoney laundering. Yet the
tensions arising from regulatory requirements within the American
business practices often prove more difficult to resolve.

It is in trying to balance the expectations of distinct business cultures

that the differences between conventional and Islamic accounting are
most notable. For instance, depending upon the type of transactions the
organizations are engaged in, the roles, responsibilities and rights
assigned to each party can be contradictory and even in direct conflict.
In some situations, such as transactions involving private equity,
venture capital, profit sharing and liquidations, organizations and
individuals employing conventional accounting may actually find they
prefer Islamic accounting. Other issues, such as those related to
taxation, require significant effort to resolve. The inherent flexibility of
Shariah is a benefit under these circumstances, since the complexity of
the contemporary tax code is highly inflexible.

Although demand for Islamic financial products and services has

increased, both the supply and the number of providers remain

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insufficient. It should also be noted that Islamic orthodoxy, expressed as

the desire to implement Shariah as the sole legal foundation of a nation,
is actually associated with progressive economic principles, including
increasing government for the poor, reducing income inequality and
increasing government ownership of industries and industries, especially
in the poorer nations of the Muslim world. While it is common to
associate traditional religious beliefs with conservative political stances
on a wide range of issues, this is only partly true, said Robert V.
Robinson, Chancellor, Professor and chair of Indiana University.

XII. Implementing AIP in Practice

Any discipline in the making is not a smooth path to walk on. The next
challenge is to first sell and then implement and further develop the
AIP practices in organizations. This will need a fundamental shift in
accounting in many organizations; as it will depend upon the
preparedness and capability of the organizations to accept an entirely
new system, and quickly shift to AIP practices. How this shift of
accounting can be smoothened and how desired results can be obtained
is another question that needs to be addressed. For this purpose, case
studies can be conducted on the organizations that claim to be, or are
reputed as, close to AIP in terms of their management systems. Some
examples of such studies in the existing literature include works of
Mohiudding and Amin (2007) and Barhem and Muhamad (2007).

In their exploratory study in Bangladesh, Sobhani and Ather (2007)

ascertain a number of factors that are perceived as causing the lack of
awareness about management in Islamic perspective. These include:
lack of knowledge on Islamic management; effects of western
education and culture; lack of true practicing Muslims; lack of
research on Islamic management; absence of Islamic environment &
culture; effects of globalization; effects of secular NGOs; lack of
teaching & practices of Holy Qur’an and Hadith; environmental
bottlenecks; lack of institutional support; and lack of media coverage
of Islamic management issues.
In order to make AIP as a principal way of management in Islamic
societies, there is a need for a macro-scale movement. AIP would not
be able to find its sterling routes unless there is supportive societal and
organizational context. Its practices would not be implemented with
the will of a single person but with readiness of everyone in the
system. Sobhani and Ather’s (2007) study highlights the issues in
their order of preference that need to be addressed to solve the
problems of awareness include: Islamization of knowledge and

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education; creating public consensus; reformation of the Government;

adjustment of globalization with Islamic values and norms; putting
restriction of NGOs, Islamizing educational models and procedures;
removing corruption; establishment of Islamic accounting research
centers; formulating rules and regulations for following Islamic values
and norms; establishing Shari’ah based accountability, administration
and communicating Islamic accounting through media. These
recommendations provide useful insights for policy makers in the
Islamic countries to seriously look into the issues and formulate
adequate strategies so that Islamic societies can benefit from AIP.

It will be relatively easy to convince Muslims about the inherent

benefits and implications of AIP. However, task will be much harder
in non-Islamic lands. Therefore, in order to promote AIP as a viable
alternative for the organizations, the researchers will need to present it
as a source of competitive advantage so that organizations in both
Islamic and non- Islamic countries can seriously consider it as an
alternative management system. The will need to highlight why and
how AIP is highly unique, more sustainable, long-term, hard to
imitate, cumulative, valuable, and non-substitutable source of
competitive advantage. They will also need to provide empirical
evidence to demonstrate the validity of their claims. Perhaps a long
way to go, but researchers of AIP will come across these challenges
one by one. Thinking about these challenges in this very beginning is
likely to result in formulation of a comprehensive long-term strategy to
build AIP as a competitive and sustainable discipline.

XIII. Researching AIP

From methodological point of view, the researchers of AIP will need to
consider which methodologies are suitable for research. The choice of
research methods is most often shaped by aims, epistemological
concerns, and norms of practice, as well as organizational, historical,
political, ethical, evidential, and personal factors, typically treated as
problems to be overcome (Buchanan and Bryman, 2007). In addition
to the nature of research question, Bryman (2007) claims that other
reasons such as disciplinary requirements–what should pass as
acceptable knowledge, policy issues–expectations concerning the kind
of knowledge they require for policy, and funding expectations of
funding bodies also play a role in choosing the research methodology.
Yet another possibility is personal interests, preferences, biases,
prejudices, and creativity in addition to technical skills, knowledge, and
competence of the researcher to conduct a particular kind of research.

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Current research on accounting is dominated by positivist or

quantitative approaches. Quantitative research methods are
characterized by the assumption that human behavior can be explained
by social facts. Such research methodologies employ the deductive
logic of the natural sciences. Quantitative methods were vastly used
for accounting studies during 1960s and 1970s. Proponents of
qualitative research argue that it allows richer descriptions, sensitivity
of ideas and meanings of the individual concerned, increased
likelihood of developing empirically supported new ideas with
practical relevance and increased interest of practitioners (Martin and
Turner, 1986). Qualitative approaches also help in discovering new
ideas and phenomena rather than verifying the old and existing
theories (Bryman, 1984).

Bryman (1984) suggests linking of more abstract philosophical issues

with questions of research practice. He thinks that it is a better and
sophisticated way of treating the comparability of different methods of
investigation than direct juxtaposition in terms of relative superiority.
Rocco et al. (2003) argue that ‘mixing methods that bring together the
strengths of both quantitative and qualitative methods will enhance
research in the field’ (Rocco et al., 2003, p. 604).

However, AIP being a discipline in-making needs to establish its

epistemological grounds and constructs in the beginning, which can
then be tested and validated at a later stage. Therefore, it seems to the
current author that the researchers need to use all quantitative,
qualitative, and mixed-method approach with maximum
methodological inventiveness.

According to Buchanan and Bryman (2007), organization research is

a meeting point for numerous disciplines including psychology, social
psychology, sociology, economics, public policy, history,
anthropology, and the business areas of strategy, finance, marketing,
human resources, and operations management. Research on AIP will
also see integration and interplay of many disciplines with in its scope.
Therefore, a debate on methodological issues to research AIP can be
beneficial in the beginning to choose appropriate research
methodologies. This will help the researchers to avoid any
methodological dilemmas at a later stage that might otherwise result in
another war or paradigms. Furthermore, while conducting research on
AIP, the researchers will need to consider the intertwining effect of
local cultures and norms in different countries around the world.

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Current debate in accounting research has repeatedly highlighted the

crosscultural issues and alerted about the cultural consequences.
Measurements and conceptual issues related to AIP will be most
crucial in cross-cultural setting.

XIV. Priority Areas of Focus

Recent attempts of research from the perspective of AIP seem to be
highlighting issues such as Ownership, Debt Contract and Accounting,
Trusteeship of Mankind, Inequality - Natural, Record Book– Audit,
Meeting Account, Verification of Information, Fulfill Contract, Full
Measure and Weight in Just, Dealing in Fraud who give less in
measure,, corporate governance, and quality management. Existing
research on AIP also appears to be without an explicit intention to
develop constructs, theories, and frameworks that can lead to
development of a comprehensive “Theory of Accounting from Islamic
Perspectives”. In order to establish AIP and its sub disciplines, it is
important that organized efforts are undertaken instead of randomly
choosing the areas for research under AIP. Body of knowledge on
conventional accounting has developed organically over almost a
hundred years. Even today, many more disciplines continue to emerge
and attract the attention of scholars. However, researchers of AIP will
have to prioritize the knowledge areas they would like to focus in the
beginning, until the field is relatively established, and there is
substantial number of qualified and established academics extensively
working in the field. If AIP research continues to grow organically and
at random choices of sub-disciplines, there is likelihood that many
researchers will be distracted or they will duplicate each other’s efforts
or will simply explore the areas, which do not contribute to a coherent
effort of developing AIP as a discipline.

There is also a possibility that research efforts on AIP in different parts

of the world are totally unaware of each other, and they lose the
opportunity of mutual sharing and complementing of the ideas and
perspectives of the subject. Therefore, proponents of AIP will need to
organize the efforts and more importantly prioritize what they want to
research, and the beginning, and what sub-discipline would then be
explored after constructs on the prioritized themes have been well
established. Only then the lessons learnt from the initial phase of the
research can be taken forward to address other issues that need to be
investigated at later stages. Few initial sub-disciplines that can be
explored in the beginning can include, but not limited to, Ownership,
Debt Contract and Accounting, Trusteeship of Mankind, Inequality -

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Natural, Record Book – Audit, Meeting Account, Verification of

Information, Fulfill Contract, Full Measure and Weight in Just,
Dealing in Fraud who give less in measure, corporate governance, and
accounting ethics. In order to develop and grow these sub-disciplines,
researchers will need to assemble the existing body of knowledge,
write inclusive literature reviews, conduct dialogues and debates, and
finally, establish research agendas as to how to approach these
disciplines from Islamic perspectives. Further sub-disciplines can then
be explored in the pipeline.

XV. Potential Opportunities

There are a number of steps that need to be taken while establishing
AIP as a formal academic discipline, and produce a useful and
rigorous research on the subject. Preceding sections discuss in detail
the achievements that have been made in the context of AIP. The
author has also highlighted multitude of challenges that face AIP
research and development. In the midst of these challenges, however,
there lie numerous opportunities. It is a very timely prospect for
scholars in the Islamic world to make use of those opportunities. They
can come up front and contribute their efforts for developing and
flourishing the field. However, their efforts need to be well planned,
systematically organized, thoroughly contemplated, and more
importantly pragmatic.

Since much needs to be accomplished in this regard, the author

proposes the formulation of an international consortium on AIP,
comprising the established researchers in Islamic studies, accounting,
basic sciences, sociology, anthropology, statistics, and other relevant
discipline to formulate and drive an organized research effort on AIP.
The consortium can establish the priority themes for research, develop
a detailed research agenda, and decide methodologies can establish the
priority themes for research, develop a detailed research agenda, and
decide methodologies to be used. To effectively divide the tasks, such
consortium can establish various task groups and working
commissions of sub-disciplines of AIP.

These research groups can then pursue their own agenda under the
guidelines of consortium. Approaching the task in this manner would
decrease the burden of this undertaking falling on only one group. This
will also ensure that there is no duplication of research endeavors by
various researchers of AIP around the world.

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Such consortium can also organize an annual congress where debates

and dialogues can be invited to share the knowledge. From different
disciplines, share the achievements that are made by various research
groups, and plan the future goals in accordance. Independent and joint
conferences and symposia of research groups can also facilitate the
knowledge sharing process. Dialogues and knowledge exchanges
between experts of AIP and conventional accounting should also be a
part of this overall endeavor so that AIP can gradually become a
mainstream discipline to benefit the entire world, be it Muslims or
non-Muslims. Organizing such activities in different parts of the world
will also help to spread the awareness about AIP within and beyond
the Islamic countries. The consortium can also extend its efforts to
issue literary journals and magazines to share the research
achievements. Additionally, the consortium can also think to establish
research centers in various Islamic countries to consolidate and
streamline the research process. The forum can be either established
independently or under the research arm of an already existing
international organization such as Organization of Islamic Countries
(OIC). This will not only be helpful in drawing capable researcher
from around the word but will also be useful in rapidly establishing the
credibility of the research that stems from the consortium efforts. Such
large-scale consortium-based effort will also be helpful in drawing
funds that will be required for developing AIP. Given the soaring
interest in Islamic Banking, Islamic Finance, and Shariah Compliance,
the author is hopeful that industry funding can be attracted for research
on AIP. Various governments can also be instrumental in driving this
undertaking by allocating research funds.

As a part of this whole effort, universities across the Islamic countries

can also offer joint courses on both Islamic Studies as well as
Accounting to establish and grow the discipline of AIP. These research
endeavors can then be closely observed by the above consortium,
which can act as an overall accrediting body for such academic efforts.
Although some universities are pioneering such efforts by offering
such courses–for example, Bachelor of Islamic Finance and Banking
(BIFB, Hons) at University Utara Malaysia–these courses are at
undergraduate level. More efforts at graduate level need to be
undertaken. AIA joins forces with BIBF to launch diploma in Islamic
Accounting and Compliance. The Association of International
Accountants (AIA) has joined forces with the Bahrain Institute of
Banking and Finance (BIBF) to officially launch its Diploma in
Islamic Accounting and Compliance at the World Islamic Funds and

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Capital Markets Conference to be held in Bahrain on 26 and 27 May

2008. AIA Chief Executive attends Bahrain conference to officially
launch new joint BIBF Diploma in Islamic Accounting and
Compliance. Aimed at employers, the new qualification provides a
thorough understanding of the Islamic Accounting and Governance
Reporting requirements as set by the Accounting and Auditing
Organization for Islamic Financial Institutions (AAOIFI) and a
comparison with International Financial Reporting Standards (IFRS).
The graduates of the AIA and BIBF Diploma in Islamic Accounting
and Compliance (DIAC) will enable Islamic financial institutions to
access global markets while maintaining the substantial processes and
forms of Islamic transactions.

PhD research projects and postdoctoral fellowships can be

instrumental to accelerate the research output and to establish various
sub-disciplines. Given the current drive in AIP research, it carries a
significant potential to grow as a formal discipline. However, this
aspiration can be materialized more effectively and efficiently, if
researchers of AIP join their hands for a larger collaborative research
endeavors instead of disintegrated and fragmented attempts, which can
considerably slow the momentum that can otherwise be achieved.

XVI. IFRS for Merger of Islamic Accounting Standards

According to Karen Remo-Listana (2009), the proponent of the
International Financial Reporting Standards (IFRS) will be in talks
with Islamic finance authorities this year and will be ready to modify
the existing system to accommodate Islamic finance standards.

According to Robert Garnett (2009), board member of International

Accounting Standards Board (IASB), there may be "slight differences"
but they can be resolved through critical judgment. "We have to
embrace all financial products so we will need to change our
standards," Garnett told Emirates Business on the sidelines of the IFRS
breakfast briefing in Dubai. "To converge with Islamic finance
standards we need to have some detailed discussions with AAOIFI
(Accounting and Auditing Organisation for Islamic Financial
Institutions) so we can have a better understanding of their concerns
and how we can accommodate those within a revised IFRS," he added.

XVII. Concluding Remarks

Accounting from Islamic perspectives (AIP) is a nascent discipline
with a considerable promise. The extant body of knowledge is largely

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fragmented and research efforts are apparently disorganized in

reference with AIP. In order to develop AIP as a formal and accepted
discipline, there are both challenges and opportunities that lie ached.
To ensure a healthy growth and expansion of the discipline,
researchers of AIP will need to integrate and streamline their efforts to
ensure that there is a constructive growth of knowledge in the
discipline before any significant split or divergence of focus can find
its roots. This paper presents a summary of literary achievements that
have been so far made in the field of AIP. It also lists and discusses the
challenges and opportunities that proponents of AIP will confront in
the future. A proposal for an international consortium has been briefly
presented to conduct organized research and establish AIP as a
mainstream discipline, which can benefit the whole world. After a long
halt of research in the Islamic world, there seems some light in the end
of the tunnel. It provides an historic opportunity for the scholars to
revive and contribute to the grand tradition of knowledge generation
and sharing that Islam encourages. It also provides an impetus for
scholars in all other disciplines to start thinking about how, as
Muslims, we can contribute to the well being of humanity.

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